UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-13400
NTS-PROPERTIES V,
A MARYLAND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
| 10172 Linn Station Road | |
| 61-1051452 | Louisville, Kentucky 40223 |
| (I.R.S. Employer Identification No.) | (Address of principal executive offices) |
Registrant's telephone number, including area code: (502) 426-4800
Maryland
(State or other jurisdiction of incorporation or organization)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each Class: None
Name of each exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act:
| Limited partnership interests | None | |
| | | |
| (Title of Class) | (Name of each exchange on which registered) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
(Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of
the Registrant's knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]
Indicate by check mark whether Registrant is an accelerated filer (as defined by Rule 12b-2
of the Securities Exchange Act of 1934).
Yes [ ]
No [X]
State the aggregate market value of the voting and non-voting common equity held by non-
affiliates computed by reference to the price at which the common equity was sold, or the
average bid and asked price of such common equity, as of a specified date within the past 60
days: No aggregate market value can be determined because no established market exists for the
limited partnership interests.
TABLE OF CONTENTS
PART I
| Pages | ||||
| Items 1. and 2. | Business and Properties | 3-13 | ||
| Item 3. | Legal Proceedings | 14-15 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 15 |
PART II
| Item 5. | Market for Registrant's Limited Partnership Interests | |||
| and Related Partner Matters | 16 | |||
| Item 6. | Selected Financial Data | 17-18 | ||
| Item 7. | Management's Discussion and Analysis of Financial Condition | |||
| and Results of Operations | 18-26 | |||
| Item 7A. | Quantitative and Qualitative Disclosures About | |||
| Market Risk | 27 | |||
| Item 8. | Financial Statements and Supplementary Data | 28-46 | ||
| Item 9. | Change in and Disagreements with Accountants on | |||
| Accounting and Financial Disclosure | 47 |
PART III
| Item 10. | Directors and Executive Officers of the Registrant | 48-49 | ||
| Item 11. | Management Remuneration and Transactions | 49 | ||
| Item 12. | Security Ownership of Certain Beneficial | |||
| Owners and Management | 50 | |||
| Item 13. | Certain Relationships and Related Transactions | 50-51 | ||
| Item 14. | Controls and Procedures | 51 |
PART IV
| Item 15. | Exhibits, Consolidated Financial Statement Schedules and | |||
| Reports on Form 8-K | 52-56 | |||
| Signatures | 57 | |||
| Certifications | 58-59 |
2
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements included in this Form 10-K, particularly those included in Part I, Items 1 and 2 - Business and Properties, and Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), may be considered "forward-looking statements" because such statements relate to matters which have not yet occurred. For example, phrases such as "we anticipate," "believe" or "expect" indicate that it is possible that the event anticipated, believed or expected may not occur. Should such event not occur, then the result which we expected also may not occur or occur in a different manner, which may be more or less favorable to us. We do not undertake any obligations to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.
Any forward-looking statements included in MD&A, or elsewhere in this report, reflect management's best judgment based on known factors and involve risks and uncertainties. Actual results could differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including but not limited to those discussed below. Any forward-looking information provided by us pursuant to the "safe harbor" provisions established by recent securities legislation should be evaluated in the context of these factors. See Part II - Item 7 for Cautionary Statements.
PART I
Items 1 and 2 - Business and Properties
Development of BusinessNTS-Properties V, a Maryland limited partnership (the "Partnership"), is a limited partnership organized under the laws of the state of Maryland on April 30, 1984. The General Partner is NTS- Properties Associates V, a Kentucky limited partnership (the "General Partner"). The general partners of the General Partner are NTS Capital Corporation and J.D. Nichols. As of December 31, 2002, the Partnership owned the following properties and joint venture interests listed below. As used in this Form 10-K the terms "we," "us" or "our," as the context requires, may refer to the Partnership or its interests in this property and these joint ventures:
3
A description of the properties owned by the L/U II Joint Venture as of December 31, 2002 appears
below: We or the joint ventures in which we are a partner have a fee title interest in the above properties.
While we believe that our properties are adequately covered by property insurance, there is a risk
that unknown mold and other microbial damage may not be covered by our insurance. Please see
Part II, Item 7 for a discussion of this potential liability. As of December 31, 2002, our properties or joint ventures were encumbered by mortgages as shown
in the table below: 4
We are engaged solely in the business of developing, constructing, owning and operating residential
apartments and commercial real estate. See Part II, Item 8 - Note 9 for information regarding our
operating segments. Narrative Description of Business Our current investment objectives are consistent with our original objectives, which are to provide
cash distributions from the operation or financing of our properties, obtain long-term capital gain
treatment on the sale or refinancing of properties, provide limited partners with deferrals of federal
income taxes, and preserve limited partners' capital. Proceeds of any sale or refinancing of our
properties may be distributed to limited partners, or may be used to repay debt or to make capital
improvements to properties. The properties we currently own, which are described in the following section, are the same as those
we originally acquired. Our properties are in a condition suitable for their intended use. We
periodically evaluate whether to retain, refinance, or sell or otherwise dispose of these properties,
with a view toward meeting the above investment objectives, including the making of distributions.
In deciding whether to sell a property, we will consider factors such as potential capital appreciation,
mortgage pre-payment penalties, market conditions, cash flow and federal income tax
considerations, including possible adverse federal income tax consequences to the limited partners.
Distributions have been suspended to fund current and future capital improvements and debt
repayment. For information on distributions, see Part II, Item 5 of this Form 10-K. In addition, see
"Potential Consolidation" later in this section for a discussion of our potential consolidation with
other affiliated entities. Commonwealth Business Center Phase II As of December 31, 2002, there were 10 tenants leasing space aggregating approximately 48,000
square feet of rentable area at Commonwealth Business Center Phase II. All leases provide for
tenants to contribute toward the payment of common area maintenance expenses, insurance and real
estate taxes. The tenants who occupy Commonwealth Business Center Phase II are professional
service entities. The principal occupations/professions practiced include engineering and an
encoding center. Two tenants individually lease more than 10% of Commonwealth Business Center
Phase II's rentable area. The occupancy levels at the business center as of December 31 were 73%
(2002), 81% (2001), 73% (2000), 86% (1999) and 79% (1998). See Part II, Item 7 for average
occupancy information. 5
The following table contains approximate data concerning the major tenant leases in effect on
December 31, 2002. Apartments at The Willows of Plainview Phase II include one and two-bedroom lofts and deluxe
apartments and two-bedroom town homes. All apartments have wall-to-wall carpeting, individually
controlled heating and air conditioning, dishwashers, ranges, refrigerators and garbage disposals.
All apartments, except one-bedroom lofts, have washer/dryer hook-ups. The one-bedroom lofts have
stackable washers and dryers. Tenants have access to and the use of coin-operated washer/dryer
facilities, clubhouse, management offices, swimming pool, whirlpool and tennis courts. Monthly rental rates at The Willows of Plainview Phase II start at $699 for one-bedroom apartments,
$959 for two-bedroom apartments and $1,079 for two-bedroom town homes, with additional
monthly rental amounts for special features and locations. Tenants pay all costs of heating, air
conditioning, water, sewer and electricity. Most leases are for a period of one year. Apartments will
be rented in some cases, however, on a shorter term basis at an additional charge. The occupancy
levels at the apartment complex as of December 31 were 89% (2002), 74% (2001), 89% (2000), 87%
(1999) and 92% (1998). See Part II, Item 7 for average occupancy information. As of December 31, 2002, there were 30 tenants leasing space aggregating approximately 73,000
square feet of the rentable area at Lakeshore Business Center Phase I. All leases provide for tenants
to contribute toward the payment of common area maintenance expenses, insurance, utilities and real
estate taxes. The tenants who occupy Lakeshore Business Center Phase I are professional service
entities. The principal occupations/professions practiced include telemarketing services, financial
services and computer integration services. There are no tenants that individually lease 10% or more
of Lakeshore Business Center Phase I's rentable area. The occupancy levels at the business center
as of December 31, were 71% (2002), 89% (2001), 85% (2000), 73% (1999) and 85% (1998). See
Part II, Item 7 for average occupancy information. As of December 31, 2002, there were 20 tenants leasing space aggregating approximately 79,000
square feet of the rentable area at Lakeshore Business Center Phase II. All leases provide for tenants
to contribute toward the payment of common area maintenance expenses, utilities, insurance and real
estate taxes. The tenants who occupy Lakeshore Business Center Phase II are professional service 6
entities. The principal occupations/professions practiced include medical equipment leasing,
insurance services and management offices for the Florida state lottery. One tenant individually
leases more than 10% of Lakeshore Business Center Phase II's rentable area. The occupancy levels
at the business center as of December 31 were 81% (2002), 82% (2001), 86% (2000), 72% (1999)
and 79% (1998). See Part II, Item 7 for average occupancy information. The following table contains approximate data concerning a major tenant lease in effect on
December 31, 2002: As of December 31, 2002, there were three tenants leasing space aggregating approximately 15,000
square feet of the rentable area at Lakeshore Business Center Phase III. All leases provide for
tenants to contribute toward the payment of common area maintenance expenses, insurance, utilities
and real estate taxes. The tenants who occupy space at Lakeshore Business Center Phase III are
professional service entities. The principal occupations/professions practiced are insurance services
and telecommunications. The building was constructed in the year 2000. The occupancy levels at
the business center as of December 31 were 37% (2002), 28% (2001) and 12% (2000). See Part II,
Item 7 for average occupancy information. The following table contains approximate data concerning the major tenant leases in effect on
December 31, 2002: Additional operating data regarding our properties is furnished in the following table. 7
Depreciation for book purposes is computed using the straight-line method over the estimated useful
lives of the assets which are 5-30 years for land improvements, 3-30 years for buildings and
improvements, 3-7 years for amenities and the applicable lease term for tenant improvements. Joint Venture Investments On September 1, 1984, we entered into a joint venture agreement with NTS-Properties IV to
develop, construct, own and operate a 144 - unit luxury apartment complex on an 8.29 acre site in
Louisville, Kentucky known as The Willows of Plainview Phase II. The term of the joint venture
shall continue until dissolved. Dissolution shall occur upon, but not before, the first to occur of the
following: The apartment complex is encumbered by permanent mortgages with two insurance companies.
Both loans are secured by a first mortgage on the property. The outstanding balance of the
mortgages on December 31, 2002 is $3,984,571 ($2,494,654 and $1,489,917). The mortgages are
recorded as a liability of the joint venture. Both mortgages bear interest at a fixed rate of 7.2% and
are due January 5, 2013. Monthly principal payments are based upon a 15-year amortization
schedule. At maturity, we believe the loans will have been repaid based on the current rate of
amortization. The net cash flow for each calendar quarter is distributed to the partners in accordance with their
respective percentage interests. The term "Net Cash Flow" means the excess, if any, of (A) the gross
receipts from the operations of the joint venture property (including investment income) for such
period plus any funds released from previously established reserves (referred to in clause (iv) below),
over (B) the sum of (i) all cash operating expenses paid by the joint venture property during such
period in the course of business, (ii) capital expenditures during such period not funded by capital
contributions, loans or paid out of previously established reserves, (iii) payments during such period
on account of amortization of the principal of any debts or liabilities of the joint venture property
and (iv) reserves for contingent liabilities and future expenses of the joint venture property.
"Percentage Interest" means that percentage which the capital contributions of a partner bears to the
aggregate capital contributions of all partners. Net income or loss is allocated between the
partners in accordance with their respective percentage interests. Our ownership share was 90.30%
on December 31, 2002, 2001 and 2000. 8
On January 23, 1995, a joint venture known as the Lakeshore/University II Joint Venture (the "L/U
II Joint Venture") was formed among us and NTS-Properties IV, NTS-Properties Plus Ltd. and
NTS/Fort Lauderdale, Ltd., affiliates of our General Partner, for purposes of owning Lakeshore
Business Center Phases I and II, University Business Center Phase II (property sold during 1998)
and certain undeveloped tracts of land adjacent to the Lakeshore Business Center development. The table below identifies which properties were contributed to the L/U II Joint Venture and the
respective owners of such properties prior to the formation of the joint venture. The term of the joint venture shall continue until dissolved. Dissolution shall occur upon, but not
before, the first to occur of the following: The properties of the L/U II Joint Venture are encumbered by mortgages payable as follows: 9
The loans are recorded as liabilities of the joint venture. The mortgages of Lakeshore Business
Center Phases I and II bear interest at a fixed rate of 8.125% and are due August 1, 2008. Monthly
principal payments are based upon a 12-year amortization schedule. At maturity, we believe the
loans will have been repaid based on the current rate of amortization. The mortgage of Lakeshore
Business Center Phase III bears interest at a variable rate based on LIBOR daily rate plus 2.3% and
is due September 8, 2003. We anticipate replacing the construction loan with permanent financing
at or before its maturity. On July 1, 2000 and July 1, 1999, we contributed $500,000 and $1,737,000, respectively, to the L/U
II Joint Venture. The other partners in the joint venture did not make capital contributions at that
time. Accordingly, the ownership percentages of the other partners in the joint venture decreased.
Effective July 1, 2000, our percentage of ownership in the L/U II Joint Venture is 81.19%, as
compared to 79.45% prior to July 1, 2000, and 69.23% prior to July 1, 1999. On July 23, 1999, the L/U II Joint Venture closed on the sale of 2.4 acres of land adjacent to the
Lakeshore Business Center for a purchase price of $528,405. We had a 79.45% interest in the joint
venture at that date. Our statement of operations reflects a net gain of approximately $71,000 for
the year ended December 31, 1999. The net cash flow for each calendar quarter is distributed to the partners in accordance with their
respective percentage interest. The term "Net Cash Flow" means the excess, if any, of (A) the sum
of (i) the gross receipts of the joint venture properties for such period (including loan proceeds),
other than capital contributions, plus (ii) any funds released from previously established reserves
(referred to in clause (B) (iv) below), over (B) the sum of (i) all cash operating expenses paid by the
joint venture during such period in the course of business, (ii) capital expenditures paid in cash
during such period, (iii) payments during such period on account of amortization of the principal of
any debts or liabilities of the joint venture and (iv) reserves for contingent liabilities and future
expenses of the joint venture, as established by the partners; provided, however, that the amounts
referred to in (B) (i), (ii) and (iii) above shall only be taken into account to the extent not funded by
capital contributions or paid out of previously established reserves. "Percentage Interest" means that
percentage which the capital contributions of a partner bears to the aggregate capital contributions
of all the partners. Net income or loss is allocated between the partners in accordance with their
respective percentage interests pursuant to the joint venture agreements. Our ownership share was
81.19% on December 31, 2002, 2001 and 2000. In June 2002, NTS-Properties Plus, one of the original members of the L/U II Joint Venture, merged
into ORIG, LLC, an affiliate of ours. As a result of the merger, ORIG has succeeded to the interests
of NTS-Properties Plus in the joint venture. See the information under the caption "Ownership of
Joint Venture" in Part II, Item 7 of this Form 10-K. 10
Competition Our properties are subject to competition from similar types of properties (including, in certain areas,
properties owned or managed by affiliates of our General Partner) in the respective vicinities in
which they are located. Such competition is generally for the retention of existing tenants at lease
expiration or for new tenants when vacancies occur. We maintain the suitability and competitiveness
of our properties primarily on the basis of effective rents, amenities and service provided to tenants.
Competition is expected to increase in the future as a result of the construction of additional
properties. In the vicinity of The Willows of Plainview Phase II, there are three apartment
communities scheduled to start construction in 2003. The first community will have approximately
300 units and is scheduled to break ground in Spring 2003. The second community will have
approximately 500 units and is scheduled to begin construction in August 2003. The third
community will have approximately 200 units and is expected to start construction some time in the
late summer of 2003. The expected completion date for all three communities is unknown at this
time. We have not commissioned a formal market analysis of competitive conditions in any market
in which we own properties, but rely upon the market condition knowledge of the employees of NTS
Development Company who manage and supervise leasing for each property. See "Conflict of
Interest." Management of Properties NTS Development Company, an affiliate of our General Partner, directs the management of our
properties pursuant to a written agreement (the "Agreement"). NTS Development Company is a
wholly-owned subsidiary of NTS Corporation. Mr. J. D. Nichols has a controlling interest in NTS
Corporation and is a General Partner of NTS-Properties Associates V. Under the Agreement, NTS
Development Company establishes rental policies and rates and directs the marketing activity of
leasing personnel. NTS Development Company also coordinates the purchase of equipment and
supplies, maintenance activity and the selection of all vendors, suppliers and independent
contractors. As compensation for its services, NTS Development Company received a total of $283,677 in
property management fees for the year ended December 31, 2002. $220,682 was received from the
commercial properties and $62,995 was received from the residential property. The fee is equal to
6% of gross revenues from commercial properties and 5% of gross revenues from residential
properties. In addition, the Agreement requires us to purchase all insurance relating to the managed properties,
to pay the direct out-of-pocket expenses of NTS Development Company in connection with our
operations, including the cost of goods and materials used for and on our behalf, and to reimburse
NTS Development Company for the salaries, commissions, fringe benefits and related employment
expenses of personnel. 11
The term of the Agreement between NTS Development Company and us was for an initial period
of five years, and renewed thereafter for succeeding one-year periods, until cancelled. The
Agreement is subject to cancellation by either party upon 60-days written notice. As of December
31, 2002, the Agreement is still in effect. Information about our working capital practices is included in Management's Discussion and
Analysis of Financial Condition and Results of Operations in Part II, Item 7. We do not consider our operations to be seasonal to any material degree. Principals of the General Partner or its affiliates own or operate real estate properties that compete,
directly or indirectly, with properties owned by us. Because we were organized by, and are operated
by the General Partner, conflicts arising from our competition with properties owned by affiliated
partnerships are not resolved through arms-length negotiations, but through the exercise of the
General Partner's judgment consistent with its fiduciary responsibility to the limited partners and
our investment objectives and policies. The General Partner is accountable to the limited partners
as a fiduciary and consequently must exercise good faith and integrity in handling our affairs. A
provision has been made in our Partnership Agreement that the General Partner will not be liable
to us except for acts or omissions performed or omitted fraudulently, in bad faith or with negligence.
The Partnership Agreement provides for indemnification of the General Partner by us for liability
resulting from errors in judgment or certain acts or omissions. The General Partner and its affiliates
have the right to compete with our properties including the right to develop competing properties
now and in the future, in addition to the existing properties which may compete directly or
indirectly. NTS Development Company, an affiliate of the General Partner, acts in a similar capacity for other
affiliated entities in the same geographic region where we have property interests. As a result of the
affiliation between NTS Development Company and our General Partner, there is a conflict of
interest between our General Partner's duty to the limited partners and its incentive to cause us to
retain our properties because of the payment of fees to NTS Development Company. We believe
the agreement with NTS Development Company is on terms no less favorable to us than those which
could be obtained from a third party for similar services in the same geographical region in which
the properties are located. The contract is terminable by either party without penalty upon 60-days
written notice. 12
We have no employees. Under the terms of the property management agreement with NTS
Development Company, NTS Development Company makes its employees available to perform
services for us. In addition to the property management fees that we pay to NTS Development
Company, we reimburse this affiliate for the actual costs of providing such services. See Part II,
Item 8 - Note 7 and Part III, Item 13 for further discussions of related party transactions. Our General Partner, along with the general partners of four other public limited partnerships
affiliated with us, is investigating a consolidation with other affiliated entities. In addition to these
affiliated entities, the consolidation would likely involve several private partnerships and our General
Partner. The new combined entity would own all of the properties currently owned by the public
limited partnerships, and the limited partners or other owners of these entities would receive an
ownership interest in the combined entity. The number of ownership interests to be received by
limited partners and the other owners of the entities participating in the consolidation would likely
be determined based on the relative value of the assets contributed to the combined entity by each
public limited partnership, reduced by any indebtedness assumed by the entity. The majority of the
contributed assets would consist of real estate properties, whose relative values would be based on
appraisals. The potential benefits of consolidating the entities include: reducing the administrative
costs as a percentage of assets and revenues by creating a single public entity; diversifying limited
partners' investments in real estate to include additional markets and types of properties; and
creating an asset base and capital structure that may enable greater access to the capital markets.
There are, however, also a number of potential adverse consequences to a consolidation such as, the
expenses associated with a consolidation and the fact that the duration of the new entity would likely
exceed our anticipated duration, and that the interests of our limited partners in the combined entity
would be smaller on a percentage basis than their interests in us. Further, the new entity may adopt
investment and management policies that are different from those presently used by our General
Partner. A consolidation requires approval of our limited partners and the limited partners and other
equity holders of the other proposed participants to the consolidation. Accordingly, there is no
assurance that the consolidation will occur. Website Information Our Internet website address is www.ntsdevelopment.com. Our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available and may
be accessed free of charge through the "About NTS" section of our Internet website as soon as
reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our
Internet website and the information contained therein or connected thereto are not intended to be
incorporated into this Annual Report on Form 10-K. 13
On December 12, 2001, three individuals filed an action in the Superior Court of the State of
California for the County of Contra Costa against our General Partner, the general partners of four
public partnerships affiliated with us and several individuals and entities affiliated with us. The
action purports to bring claims on behalf of a class of limited partners based on, among other things,
tender offers made by the public partnerships and an affiliate of our General Partner. The plaintiffs
allege, among other things, that the prices at which limited partnership interests were purchased in
these tender offers were too low. The plaintiffs are seeking monetary damages and equitable relief,
including an order directing the disposition of the properties owned by the public partnerships and
the distribution of the proceeds. No amounts have been accrued as a liability for this action in our
consolidated financial statements at December 31, 2002. Under an indemnification agreement with our General
Partner, we are responsible for the costs of defending this action. For the year ended December 31,
2002, our share of these legal costs was approximately $80,000, which was expensed. On September 24, 2002, in connection with the above-described lawsuit, the plaintiffs voluntarily
dismissed two of the individuals and one of the entities that had objected to the lawsuit on personal
jurisdiction grounds. This dismissal was the result of an agreement under which some defendants
agreed not to contest jurisdiction and plaintiffs agreed to dismiss other defendants. Additionally,
on October 22, 2002, the court issued an order sustaining the demurrer of the general partners of
three limited partnerships affiliated with us. The effect of this ruling is that these three general
partners are no longer parties to the lawsuit. On the same date the court overruled the demurrer of
our General Partner, the general partner of one other partnership affiliated with us and one individual
and two entities affiliated with us. The entities and individuals whose demurrers were overruled,
including our General Partner, remain defendants in the lawsuit. Our General Partner believes the
lawsuit is without merit, and is vigorously defending it. On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our General Partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of a public partnership affiliated
with us and a partnership that was affiliated with us but is no longer in existence. In the amended
complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. Our
General Partner believes that this action is without merit, and intends to vigorously defend it. 14
We do not believe there is any other litigation threatened against us other than routine litigation
arising out of the ordinary course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material effect on our financial position or results of operations
except as discussed herein. None. 15
PART II There is no established trading market for the limited partnership interests, nor is one likely to
develop. We had 1,352 limited partners as of January 31, 2003. Cash distributions and allocations
of income (loss) are made as described in Item 8 - Note 1D. No distributions were paid during 2002 or 2001. Quarterly distributions are determined based on
current cash balances, cash flow being generated by operations and cash reserves needed for future
leasing costs, tenant finish costs and capital improvements. Distributions have been suspended to
fund current and future capital improvements and debt repayment. Our ability to pay distributions
is dependent upon, among other things, our ability to refinance properties on favorable terms. 16
Years ended December 31: The above selected financial data should be read in conjunction with the consolidated financial
statements and related notes appearing elsewhere in this Form 10-K report. 17
The Emerging Issues Tasks Force ("EITF") of the Financial Accounting Standards Board ("FASB")
reached a consensus on Issue No. 00-1, "Applicability of the Pro Rata Method of Consolidation to
Investments in Certain Partnerships and Other Unincorporated Joint Ventures." The EITF reached
a consensus that a proportionate gross financial statement presentation (referred to as "proportionate
consolidation" in the Notes to Consolidated Financial Statements) is not appropriate for an
investment in an unincorporated legal entity accounted for by the equity method of accounting,
unless the investee is in either the construction industry or an extractive industry where there is a
longstanding practice of its use. The consensus is applicable to financial statements for annual periods ending after June 15, 2000.
We have applied the consensus to all comparative financial statements, restating them to conform
with the consensus for all periods presented. The application of this consensus did not result in a
restatement of previously reported partners' equity or results of operations, but did result in a
recharacterization or reclassification of certain financial statements' captions and amounts. The
affected data in the table above has been restated to provide comparable information for all periods
presented. This Management's Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") should be read in conjunction with the Consolidated Financial Statements in Item 8 and
the Cautionary Statements below. Our most critical business assumption is that our properties' occupancy will remain at a level which
provides for debt payments and adequate working capital, currently and in the future. If occupancy
were to fall below that level and remain at or below that level for a significant period of time, then
our ability to make payments due under our debt agreements and to continue paying daily
operational costs would be greatly affected. We review properties for impairment on a property-by-property basis whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. These circumstances
include, but are not limited to, declines in cash flows and occupancy. We recognize an impairment
of property when the estimated undiscounted operating income before depreciation and amortization
is less than the carrying value of the property. To the extent an impairment has occurred, we charge
to income the excess of the carrying value of the property over its estimated fair value. We may
decide to sell properties that are held for use. The sales prices of these properties may differ from
their carrying values. 18
During the year ended December 31, 2002, we adopted Statement of Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," and the accounting and reporting provisions of Accounting
Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions." SFAS No. 144 requires one accounting model to be used for long-lived assets
to be disposed of by sale, whether previously held or used or newly acquired, and it broadens the
presentation of discontinued operations to include more disposal transactions. Our adoption of
SFAS No. 144 did not impact the consolidated financial statements in 2002. The occupancy levels at our properties and joint ventures as of December 31 were as follows: The average occupancy levels at our properties and joint ventures for the years ended December 31
were as follows: 19
The rental and other income generated by our properties and joint ventures for the years ended
December 31 were as follows: On June 25, 2002, NTS-Properties Plus Ltd. merged with ORIG, LLC, ("ORIG") an affiliate of our
General Partner. ORIG is the surviving entity as a result of this merger. NTS-Properties V
continues to hold a 81.19% interest in the L/U II Joint Venture after the completion of the NTS-
Properties Plus Ltd./ORIG Merger. ORIG now holds a 7.69% interest in the L/U II Joint Venture. The following table of segment data is provided: 20
Several general trends have affected our recent operating results. Net revenues for residential have
decreased slightly due to lower average occupancy at The Willows of Plainview Phase II, while
commercial net revenues have increased slightly due to overall occupancy gains at Lakeshore
Business Center. Operating expenses increased from 2000 levels primarily due to increased
insurance expense. Interest expense essentially remained level while depreciation and amortization increased
primarily as a result of the completion of Lakeshore Business Center Phase III. Rental Income Rental income increased approximately $321,000, or 7%, from 2000 to 2001, primarily as a result
of increased occupancy at Lakeshore Business Center Phases I and III, and an increase in rental rates
at Lakeshore Business Center Phases I and II. The increase is partially offset by a decrease in rental
income from Commonwealth Business Center Phase II and The Willows of Plainview Phase II due
to decreased occupancy. Year-ending occupancy percentages represent occupancy only on a specific date; therefore, the
above analysis considers average occupancy percentages which are more representative of the entire
year's results. Interest and other income includes income earned from short-term investments made by us with cash
reserves. Interest income decreased approximately $96,000, or 61%, from 2000 to 2001, as a result
of a decrease in cash reserves available for investment. Operating expenses increased approximately $347,000, or 31%, from 2000 to 2001, primarily as the
result of increased insurance expense at all of the Partnership's properties, increased legal fees at
Lakeshore Business Center Phases I, II and III, and increased landscape maintenance at The Willows
of Plainview Phase II. Partially offsetting the increase is a decrease in janitorial services at
Commonwealth Business Center Phase II. 21
The 2000 loss on disposal of assets can be attributed to the retirement of assets at Lakeshore
Business Center Phases I and II and The Willows of Plainview Phase II which were not fully
depreciated. The retirements were due to common area renovations at Lakeshore Business Center
Phases I and II and wood and exterior renovations at The Willows of Plainview Phase II. Interest expense decreased approximately $96,000, or 9%, from 2001 to 2002, primarily due to
regular principal payments on the mortgage at Lakeshore Business Center Phases I and II and The
Willows of Plainview Phase II. Interest expense increased approximately $130,000, or 13%, from
2000 to 2001, primarily as a result of funds drawn on the Lakeshore Business Center Phase III
construction loan. Professional and administrative expenses increased approximately $114,000, or 95%, from 2001 to
2002, primarily as a result of increased legal fees paid under and indemnification agreement with
our General Partner. Depreciation and amortization increased approximately $209,000, or 20%, from 2000 to 2001,
primarily as a result of the Lakeshore Business Center Phase III construction completed in
November 2000 resulting in building and land improvements capitalized in December 2000. Also
contributing to the increase is the change in estimate, by management, of the useful lives of the
Lakeshore Business Center Phase I roofs from 30 years to 16.5 years in anticipation of replacing the
roofs. The aggregate cost of the Partnership's properties for federal tax purposes is approximately
$41,271,000. The majority of our cash flow is derived from operating activities. Cash flows used in investing
activities consist of amounts spent for capital improvements at our properties. Cash flows used in
financing activities consist of principal payments on mortgages payable, payment of loan costs and
amounts paid to repurchase limited partnership interests. We do not expect any material changes
in the mix and relative cost of capital resources from those in 2002. 22
The following table illustrates our cash flows provided by or used in operating activities, investing
activities and financing activities: Net cash provided by operating activities decreased approximately $416,000, or 55%, from 2001 to
2002, primarily as a result of a decrease in accounts payable and a decrease in net operating results
before non-cash items. Net cash provided by operating activities decreased approximately $355,000, or 32%, from 2000 to
2001, primarily as a result of a decrease in net operating results before non-cash items which was
partially offset by an increase in accounts payable. Net cash used in investing activities decreased approximately $2,859,000, or 85%, from 2000 to
2001, primarily as the result of decreased capital expenditures for the construction of Lakeshore
Business Center Phase III. Net cash used in financing activities decreased approximately $365,000, or 57%, from 2001 to 2002,
primarily as the result of an increase in proceeds from the short-term mortgage on Commonwealth
Business Center Phase II, partially offset by continued principal payments on the mortgage at
Lakeshore Business Center Phases I and II and The Willows of Plainview Phase II. Net cash provided by financing activities decreased approximately $820,000 from 2000 to 2001,
primarily due to fewer additions to the Lakeshore Business Center Phase III construction loan and
continued principal payments on the mortgage at Lakeshore Business Center Phases I and II and The
Willows of Plainview Phase II. Due to the fact that no distributions were made during 2002, 2001 or 2000, the table which presents
that portion of the distributions that represents a return of capital based on Accounting Principles
Generally Accepted in the United States has been omitted. On March 14, 2003 we reached an agreement with the mortgage lender on the Lakeshore Business
Center Phases I and II mortgages to suspend principal payments for twelve months beginning with
the payments due May 1, 2003. The principal payments due the lender will continue to be paid and
deposited by the lender into an escrow account. We will then be allowed to draw upon the escrowed
funds for specific capital improvements listed in the agreement. They include tenant finish costs,
heating and air conditioning equipment and roof replacements, which are expected to total
approximately $987,000. The agreement does not change any terms of the existing mortgage loans. 23
However, the suspension of principal payments will result in significant balances remaining due on
the loans at maturity in 2008, currently estimated to be approximately $ 757,000 and $ 814,000,
respectively. On March 14, 2003 we signed a tenant to a lease for approximately 20,000 square feet of the
Lakeshore Business Center Phase III. The lease agreement calls for us to provide tenant finish
costing approximately $705,000. We expect to use existing and new financing sources to make these
expenditures. There can be no assurances that we will be successful in seeking new sources of
financing for Lakeshore Business Center Phase III. We have no other material commitments for renovations or capital improvements as of December
31, 2002. We are making efforts to increase the occupancy levels at our properties. At Commonwealth
Business Center Phase II, the leasing and renewal negotiations are conducted by leasing agents that
are employees of NTS Development Company in Louisville, Kentucky. The leasing agents are
located in the same city as the property. All advertising is coordinated by NTS Development
Company's marketing staff located in Louisville, Kentucky. The leasing and renewal negotiations
at Lakeshore Business Center Phases I, II and III are managed by an employee of NTS Development
Company. At The Willows of Plainview Phase II, we have an on-site leasing staff that are
employees of NTS Development Company, who facilitate all on-site visits from potential tenants,
make visits to local companies to promote fully furnished apartments, negotiate lease renewals with
current residents and coordinate all local advertising with NTS Development Company's marketing
staff. Leases at our commercial properties provide for tenants to contribute toward the payment of
common area maintenance expenses, insurance and real estate taxes. These lease provisions, along
with the fact that residential leases are generally for a period of one year, provide limited protection
to our operations from the impact of inflation and changing prices. Across the United States there have been recent reports of lawsuits against owners and managers of
multi-family and commercial properties asserting claims of personal injury and property damage
caused by the asserted presence of mold and other microbial organisms in residential units and
commercial space. Some of these lawsuits have resulted in substantial monetary judgments or
settlements. We have not, at present, been named as a defendant in any lawsuit that has alleged the
presence of mold or other microbial organisms. Prior to September 13, 2002, we were insured
against claims arising from the presence of mold due to water intrusion. However, since September
13, 2002, certain of our insurance carriers have excluded from insurance coverage property damage
loss claims arising from the presence of mold, although certain of our insurance carriers do provide
some coverage for personal injury claims. We are in the process of implementing protocols and
procedures to prevent the build-up of mold and other microbial organisms in our properties, and are
in the process of implementing more stringent maintenance, housekeeping and notification
requirements for tenants in our properties. We believe that these measures will eliminate, or at least, 24
minimize any effect that mold or other microbial organisms could have on our tenants. To date, we
have not incurred any material costs or liabilities relating to claims of mold exposure or to abate
mold conditions. Because the law regarding mold is unsettled and subject to change, however, we
can make no assurance that liabilities resulting from the presence of, or exposure to, mold or other
microbial organisms will not have a material adverse effect on our consolidated financial condition
or results of operations and our subsidiaries taken as a whole. The following disclosure represents our obligations and commitments to make future payments
under contracts, such as debt and lease agreements, and under contingent commitments, such as debt
guarantees. 25
Cautionary Statements Our liquidity, capital resources and results of operations are subject to a number of risks and
uncertainties including, but not limited to the following: 26
Our primary market risk exposure with regard to financial instruments is changes in interest rates.
Our debt bears interest at a fixed rate with the exception of the $1,844,049 mortgage payable
on Lakeshore Business Center Phase III, the $800,000 mortgage payable on Commonwealth
Business Center Phase II, and the various notes payable on The Willows of Plainview Phase II. On
December 31, 2002, a hypothetical 100 basis point increase in interest rates would result in an
approximate $380,000 decrease in the fair value of all debt and would increase interest expense on
the variable rate mortgages by approximately $27,000 for the year. 27
Item 8 - Financial Statements and Supplementary Data REPORT OF INDEPENDENT AUDITORS To NTS-Properties V, a Maryland Limited Partnership: We have audited the accompanying consolidated balance sheet of NTS-Properties V, a Maryland
Limited Partnership (the Partnership) as of December 31, 2002, and the related consolidated
statements of operations, partners' equity and cash flows for the year then ended. Our audit also
included the consolidated financial statement schedule listed in the index at Item 15(a). These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on our audit.
The consolidated financial statements of the Partnership and the consolidated financial statement
schedule as of December 31, 2001, and for each of the two years in the period ended December 31,
2001, were audited by other auditors who have ceased operations and whose report dated March 21,
2002, expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United
States. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion. In our opinion, the 2002 consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of NTS-Properties V, a Maryland Limited
Partnership as of December 31, 2002, and the consolidated results of its operations and its cash flows
for the year then ended in conformity with accounting principles generally accepted in the United
States. Also, in our opinion, the related consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein. Louisville, Kentucky 28
This report is a copy of the previously issued Arthur Andersen LLP ("Andersen") Auditors' REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To NTS-Properties V, a Maryland limited partnership: We have audited the accompanying consolidated balance sheets of NTS-Properties V, a Maryland
limited partnership, as of December 31, 2001 and 2000, and the related consolidated statements of
operations, partners' equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements and the schedules referred to below are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United
States. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of NTS-Properties V, a Maryland limited partnership as of December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2001 in conformity with accounting principles generally accepted in the United
States. Our audits were made for the purpose of forming an opinion on the basic financial statements taken
as a whole. The schedule of Real Estate and Accumulated Depreciation included in this filing is
presented for purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in relation to the basic financial
statements taken as a whole. ARTHUR ANDERSEN LLP Louisville, Kentucky 29
NTS-PROPERTIES V, The accompanying notes to consolidated financial statements are an integral part of these statements. 30
NTS PROPERTIES V, The accompanying notes to consolidated financial statements are an integral part of these statements. 31
NTS-PROPERTIES V, The accompanying notes to consolidated financial statements are an integral part of these statements. 32
NTS-PROPERTIES V, The accompanying notes to consolidated financial statements are an integral part of these statements. 33
NTS-PROPERTIES V, Note 1 - Significant Accounting Policies NTS-Properties V, a Maryland limited partnership (the "Partnership"), is a limited partnership
organized on April 30, 1984. The General Partner is NTS-Properties Associates V, a Kentucky
limited partnership. We are in the business of developing, constructing, owning and operating
residential apartments and commercial real estate. The consolidated financial statements included the accounts of all wholly-owned properties and
majority-owned joint ventures. Intercompany transactions and balances have been eliminated. The
terms "we," "us" or "our," as the context requires, may refer to the Partnership or its interests in this
property and joint ventures. We own and operate the following properties and joint ventures: Lakeshore Business Center Phase I - a business center with approximately 34
Operating net cash receipts, as defined in the Partnership Agreement and which are made available
for distribution will be distributed 1) 99% to the limited partners and 1% to the General Partner until
the limited partners have received their 8% preferred return as defined in the Partnership Agreement;
2) to the General Partner in an amount equal to approximately 10% of the limited partners 8%
preferred return and 3) the remainder, 90% to the limited partners and 10% to the General Partner.
Net operating income (loss), exclusive of depreciation, is allocated to the limited partners and the
General Partner in proportion to their cash distributions. Net operating income, exclusive of
depreciation, in excess of cash distributions shall be allocated as follows: (1) pro rata to all partners
with a negative capital account in an amount to restore their respective negative capital account to
zero; (2) 99% to the limited partners and 1% to the General Partner until the limited partners have
received cash distributions from all sources equal to their original capital; (3) the balance, 75% to
the limited partners and 25% to the General Partner. Depreciation expense is allocated 99% to the
limited partners and 1% to the General Partner for all periods presented in the accompanying
consolidated financial statements. We have received a ruling from the Internal Revenue Service stating that we are classified as a
limited partnership for federal income tax purposes. As such, we make no provision for income
taxes. The taxable income or loss is passed through to the holders of partnership interests for
inclusion on their individual income tax returns. A reconciliation of net loss for financial statement purposes versus that for income tax reporting is
as follows: The preparation of financial statements in accordance with Accounting Principles Generally
Accepted in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 35
We have a cash management program which provides for the overnight investment of excess cash
balances. Per an agreement with a bank, excess cash is invested in a repurchase agreement for U.S.
Government or agency securities on a nightly basis. As of December 31, 2002, approximately
$97,000 was transferred into the investment. Cash and equivalents - restricted represents: 1) funds received for residential security deposits and
2) funds with mortgage companies for property taxes in accordance with the loan agreements with
said mortgage companies. Land, buildings and amenities are stated at historical cost less accumulated depreciation. Costs
directly associated with the acquisition, development and construction of a project are capitalized.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets
which are 5-30 years for land improvements, 3-30 years for buildings and improvements, 3-7 years
for amenities and the applicable lease term for tenant improvements. Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," specifies circumstances in which certain long-lived assets must
be reviewed for impairment. If such review indicates that the carrying amount of an asset exceeds
the sum of its expected future cash flows, the asset's carrying value must be written down to fair
value. Application of this standard during the year ended December 31, 2002 did not result in an
impairment loss. We recognize revenue in accordance with each tenant's respective lease agreement. Certain of our
lease agreements for the commercial properties are structured to include scheduled and specified rent
increases over the lease term. For financial reporting purposes, the income from these leases is being
recognized on a straight-line basis over the lease term. Accrued income under these leases is
included in accounts receivable and totaled $309,907 and $200,391 on December 31, 2002 and 2001,
respectively. All commissions paid to commercial leasing agents and incentives paid to tenants are
deferred and amortized on a straight-line basis over the applicable lease term. We expense advertising costs as incurred. Advertising expense was immaterial to us during the
years ended December 31, 2002, 2001 and 2000. 36
For purposes of reporting cash flows, cash and equivalents include cash on hand and short-term,
highly liquid investments with initial maturities of three months or less. During the year ended December 31, 2002, we adopted SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144
requires one accounting model to be used for long-lived assets to be disposed of by sale, whether
previously held or used or newly acquired, and it broadens the presentation of discontinued
operations to include more disposal transactions. Our adoption of SFAS No. 144 did not impact the
consolidated financial statements in 2002. We own and operate or have a joint venture investment in commercial properties in Louisville,
Kentucky, and Ft. Lauderdale, Florida. We also have a joint venture investment in a residential
property in Louisville, Kentucky. Our financial instruments that are exposed to concentrations of credit risk consist of cash and
equivalents. We maintain our cash accounts primarily with banks located in Kentucky. The total cash
balances are insured by the FDIC up to $100,000 per bank account. We may at times, in certain
accounts, have deposits in excess of $100,000. Between October 13, 1998 and December 31, 2001, we and ORIG, LLC, ("ORIG") an affiliate of
ours, (the "Offerors"), filed five tender offers with the Securities and Exchange Commission.
Through the five tender offers, we repurchased 3,473 Interests for $720,715 at a price ranging from
$205 to $230 per Interest. ORIG purchased 7,783 Interests for $1,743,640 at a price ranging from
$205 to $230 per Interest. ORIG did not participate in the second tender offer. We did not
participate in the fifth tender offer. Interests repurchased by us were retired. Interests purchased by
ORIG are being held by it. 37
On May 10, 2002, ORIG commenced a tender offer to purchase up to 2,000 Interests at a price of
$230 per Interest. ORIG had the option to acquire additional Interests on a pro rata basis if more than
2,000 Interests were tendered. The tender offer was scheduled to expire on August 9, 2002. On July 31, 2002, ORIG amended its tender offer to extend the expiration date from August 9, 2002,
to September 9, 2002. ORIG's tender offer expired September 9, 2002. A total of 1,586 Interests were tendered. ORIG
accepted all Interests tendered at a purchase price of $230 per Interest for a total of $364,780. We
did not participate in this tender offer. The following schedule provides an analysis of our investment in property held for lease as of
December 31: 38
Note 5- Mortgages and Notes Payable Mortgages and notes payable as of December 31 consist of the following: We intend to seek permanent financing for the mortgage loan coming due September 8, 2003 and
renewal of the mortgage loan coming due August 1, 2003. There can be no assurance that we will
be successful in obtaining these financings or that the rates or terms will be acceptable. Our mortgages may be prepaid but are generally subject to prepayment of a yield-maintenance
premium. 39
Scheduled maturities of debt are as follows: Based on the borrowing rates currently available to us for mortgages with similar terms and average
maturities, the fair value of long-term debt on December 31, 2002 and 2001 was approximately
$14,032,000 and $13,973,000, respectively. The following is a schedule of minimum future rental income on noncancellable operating leases as
of December 31, 2002: Pursuant to an agreement with us, NTS Development Company, an affiliate of our General Partner,
receives property management fees on a monthly basis. The fees are paid in an amount equal to 5%
of the gross revenues from the residential property and 6% of the gross revenues from the
commercial properties. Also permitted by an agreement, NTS Development Company receives a
repair and maintenance fee equal to 5.9% of costs incurred which relate to capital improvements.
These repair and maintenance fees are capitalized as part of land, buildings and amenities. We were charged the following amounts pursuant to an agreement with NTS Development Company
for the years ended December 31, 2002, 2001 and 2000. These charges include items which have
been expensed as operating expenses - affiliated or professional and administrative expenses -
affiliated and items which have been capitalized as other assets or as land, buildings and amenities. 40
We, as an owner of real estate, are subject to various environmental laws of federal, state and local
governments. Compliance by us with existing laws has not had a material adverse effect on our
financial condition and results of operations. However, we cannot predict the impact of new or
changed laws or regulations on our current properties or on properties that we may acquire in the
future. On December 12, 2001, three individuals filed an action in the Superior Court of the State of
California for the County of Contra Costa against our General Partner, the general partners of four
public partnerships affiliated with us and several individuals and entities affiliated with us. The
action purports to bring claims on behalf of a class of limited partners based on, among other things,
tender offers made by the public partnerships and an affiliate of our General Partner. The plaintiffs
allege, among other things, that the prices at which limited partnership interests were purchased in
these tender offers were too low. The plaintiffs are seeking monetary damages and equitable relief,
including an order directing the disposition of the properties owned by the public partnerships and
the distribution of the proceeds. No amounts have been accrued as a liability for this action in our
consolidated financial statements at December 31, 2002. Under an indemnification agreement with our General
Partner, we are responsible for the costs of defending this action. For the year ended December 31,
2002, our share of these legal costs was approximately $80,000, which was expensed. On September 24, 2002, in connection with the above-described lawsuit, the plaintiffs voluntarily
dismissed two of the individuals and one of the entities that had objected to the lawsuit on personal
jurisdiction grounds. This dismissal was the result of an agreement under which some defendants
agreed not to contest jurisdiction and plaintiffs agreed to dismiss other defendants. Additionally, 41
on October 22, 2002, the court issued an order sustaining the demurrer of the general partners of
three limited partnerships affiliated with us. The effect of this ruling is that these three general
partners are no longer parties to the lawsuit. On the same date the court overruled the demurrer of
our General Partner, the general partner of one other partnership affiliated with us and one individual
and two entities affiliated with us. The entities and individuals whose demurrers were overruled,
including our General Partner, remain defendants in the lawsuit. Our General Partner believes the
lawsuit is without merit, and is vigorously defending it. On February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of
Jefferson County, Kentucky against our General Partner, the general partners of three public
partnerships affiliated with us and several individuals and entities affiliated with us. On March 21,
2003, the complaint was amended to include the general partners of a public partnership affiliated
with us and a partnership that was affiliated with us but is no longer in existence. In the amended
complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and
derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees,
prohibited investments, improper failures to make distributions, purchases of limited partnership
interests at insufficient prices and other violations of the limited partnership agreements. The
plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified
amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of
dissolution against the public partnerships, a declaratory judgment, and injunctive relief. Our
General Partner believes that this action is without merit, and intends to vigorously defend it. We do not believe there is any other litigation threatened against us other than routine litigation
arising out of the ordinary course of business, some of which is expected to be covered by insurance,
none of which is expected to have a material effect on our financial position or results of operations
except as discussed herein. Our reportable operating segments include - Residential and Commercial Real Estate Operations.
The residential operations represent our ownership and operating results relative to an apartment
community known as The Willows of Plainview Phase II. The commercial operations represent our
ownership and operating results relative to suburban commercial office space known as
Commonwealth Business Center Phase II and Lakeshore Business Center Phases I, II and III. The financial information of the operating segments has been prepared using a management
approach, which is consistent with the basis and manner in which our management internally reports
financial information for the purposes of assisting in making internal operating decisions. Our
management evaluated performance based on stand-alone operating segment net income. 42
43
44
A reconciliation of the totals reported for the operating segments to the applicable line items in the
consolidated financial statements is necessary given amounts recorded at the Partnership level and
not allocated to the operating properties for internal reporting purposes: 45
On March 14, 2003 we reached an agreement with the mortgage lender on the Lakeshore Business
Center Phases I and II mortgages to suspend principal payments for twelve months beginning with
the payments due May 1, 2003. The principal payments due the lender will continue to be paid and
deposited by the lender into an escrow account. We will then be allowed to draw upon the escrowed
funds for specific capital improvement listed in the agreement. They include tenant finish costs,
heating and air conditioning equipment and roof replacements. The agreement does not change any
terms of the existing mortgage loans. However, the suspension of principal payments will result in
significant balances remaining due on the loans at maturity, currently estimated to be approximately
$ 757,000 and $ 814,000, respectively. On March 14, 2003 we signed a tenant to a lease for approximately 20,000 square feet of the
Lakeshore Business Center Phase III. The lease agreement calls for us to provide tenant finish
costing approximately $705,000. 46
Item 9 - Change in and Disagreements with Accountants on Accounting and Financial
Disclosure None. 47
PART III Because we are a limited partnership and not a corporation, we do not have directors or officers. We
are managed by our General Partner, NTS-Properties Associates V. Additionally we have entered
into a management contract with NTS Development Company, an affiliate of our General Partner,
to provide property management services. The General Partners of NTS-Properties Associates V are as follows: Mr. Nichols (age 61) is the managing General Partner of NTS-Properties Associates V and is
Chairman of the Board of NTS Corporation (since 1985) and NTS Development Company (since
1977). NTS Capital Corporation (formerly NTS Corporation) is a Kentucky corporation formed in October
1979. J. D. Nichols is Chairman of the Board and the sole director of NTS Capital Corporation. The Manager of our properties is NTS Development Company, the executive officers and/or
directors of which are J. D. Nichols, Brian F. Lavin and Gregory A. Wells. Brian F. Lavin (age 49), President of NTS Corporation and NTS Development Company joined the
Manager in June 1997. From November 1994 through June 1997, Mr. Lavin served as President of
the Residential Division of Paragon Group, Inc. and as a Vice President of Paragon's Midwest
Division prior to November 1994. In this capacity, he directed the development, marketing, leasing
and management operations for the firms expanding portfolios. Mr. Lavin attended the University of Missouri where he received his Bachelor's Degree in Business
Administration. He is a licensed Kentucky Real Estate Broker and Certified Property Manager. Mr.
Lavin is a member of the Institute of Real Estate Management, council member of the Urban Land
Institute and member of the National Multi-Housing Council. He has served on the Boards of the
Louisville Science Center, Louisville Ballet, Greater Louisville Inc., National Multi-Housing
Council, Louisville Apartment Association, the Board of Trustees for the Louisville Olmsted Parks
Conservancy, Inc. and currently serves on the Board of Directors and Executive Committee of
Greater Louisville Inc. and Board of Overseers for the University of Louisville. 48
Mr. Wells (age 44), Senior Vice President and Chief Financial Officer of NTS Corporation and NTS
Development Company, joined the Manager in July 1999. From May 1998 through June 1999, Mr.
Wells served as Chief Financial Officer of Hokanson Companies, Inc. and as Secretary and Treasurer
of Hokanson Construction, Inc. in Indianapolis, Indiana from January 1995 through May 1998. In
these capacities, he directed financial and operational activities for commercial real estate, company
owned and third-party managed properties, building and suite renovations, and commercial and
residential construction. Mr. Wells previously served as Vice President of Operations and Treasurer
of Executive Telecom System, Inc., a subsidiary of The Bureau of National Affairs, Inc.
(Washington, D.C.). Mr. Wells received a Bachelor's Degree in Business Administration from
George Mason University and is a Certified Public Accountant in Virginia and Kentucky. He
participates in a number of charitable and volunteer activities in the Louisville, Kentucky area. Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that certain persons,
including persons who own more than ten percent (10%) of our limited partnership interests, file
initial statements of beneficial ownership (Form 3), and statements of changes in beneficial
ownership (Forms 4 or 5), with the U.S. Securities and Exchange Commission (the "SEC"). The
SEC requires that these persons furnish us with copies of all forms filed with the SEC. To our knowledge, based solely on review of the copies of forms we received, or written
representations from certain reporting persons, that no additional forms were required for those
persons. The officers and/or directors of our corporate General Partner receive no direct remuneration in such
capacities. We are required to pay a property management fee based on gross revenues to NTS
Development Company. We are also required to pay to NTS Development Company a repair and
maintenance fee on costs related to specific projects and a refinancing fee on net cash proceeds from
the refinancing of any of our properties. Also, NTS Development Company provides certain other
services to us. See Item 8 - Note 7 which sets forth transactions with affiliates of our General Partner
for the years ended December 31, 2002, 2001 and 2000. Our General Partner is entitled to receive cash distributions and allocations of profits and losses from
us. See Item 8 - Note 1D which describes the methods used to determine income allocations and
cash distributions. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of
Operations, along with Consolidated Cash Flows and Financial Condition, for information
concerning recent tender offers for our limited partners. 49
The following provides details regarding owners of more than 5% of the total outstanding limited
partnership interests as of January 31, 2003. Oceanridge Investments, Ltd. is a limited partnership controlled by members of the family of Mr.
J. D. Nichols, a general partner of our General Partner. ORIG, LLC is a Kentucky limited liability company, the members of which are J. D. Nichols (1%),
Barbara M. Nichols (J.D. Nichols' wife) (74%) and Brian F. Lavin (25%). J.D. Nichols and Brian
F. Lavin are the Chairman and President, respectively, of NTS Capital Corporation, a general partner
of NTS Properties Associates V, our General Partner. Our General Partner is NTS-Properties Associates V, a Kentucky limited partnership, 10172 Linn
Station Road, Louisville, Kentucky 40223. The general partners of the General Partner and their
total respective (general and limited) interests in NTS-Properties Associates V are as follows: The remaining 40% interests are owned by various limited partners of NTS-Properties Associates
V. Pursuant to an agreement with us, NTS Development Company, an affiliate of our General Partner,
receives property management fees on a monthly basis. The fees are paid in an amount equal to 5%
of the gross revenues from the residential property and 6% of the gross revenues from the
commercial properties. Also permitted by an agreement, NTS Development Company receives a
repair and maintenance fee equal to 5.9% of costs incurred which relate to capital improvements.
These repair and maintenance fees are capitalized as part of land, buildings and amenities. 50
We were charged the following amounts pursuant to an agreement with NTS Development Company
for the years ended December 31, 2002, 2001 and 2000. These charges include items which have
been expensed as operating expenses - affiliated or professional and administrative expenses -
affiliated and items which have been capitalized as other assets or as land, buildings and amenities. Our affiliate, ORIG, LLC has participated in Tender Offers for our Interests. See Item 8 - Note 3
for additional information on these tender offers. The Chief Executive Officer and Chief Financial Officer of NTS Capital Corporation, the General
Partner of our General Partner, have concluded, based on their evaluation within 90 days of the filing
date of this report, that our disclosure controls and procedures are effective for gathering, analyzing
and disclosing the information we are required to disclose in our reports filed under the Securities
Exchange Act of 1934. There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of the previously
mentioned evaluation. 51
PART IV Item 15 - Exhibits, Consolidated Financial Statement Schedules and Reports on Form 8-K The consolidated financial statements for the year ended December 31, 2002 along with the report
from Ernst & Young LLP dated March 26, 2003, and the consolidated financial statements for the
years ended December 31, 2001 and 2000 along with a copy of the report from Arthur Andersen LLP
dated March 21, 2002, which has not been reissued, appear in Part II, Item 8. The following
consolidated schedules should be read in conjunction with those consolidated financial statements. All other schedules have been omitted because they are not applicable, are not required, or because
the required information is included in the consolidated financial statements or notes thereto. Item 3 - Exhibits 52
Item 4 - Reports on Form 8-K None. 53
NTS-PROPERTIES V, 54
NTS-PROPERTIES V, 55
NTS-PROPERTIES V, 56
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has
been signed below by the following persons on behalf of the registrant in their capacities and on
the date indicated above. We are a limited partnership and no proxy material has been sent to the limited partners. We will
deliver to the limited partners an annual report containing our financial statements and a message
from our General Partner. 57
CERTIFICATION Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 I, Brian F. Lavin, certify that: Date: March 31, 2003 /s/ Brian F. Lavin See also the certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002, which is also attached to this
report. 58
CERTIFICATION Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 I, Gregory A. Wells, certify that: Date: March 31, 2003 /s/ Gregory A. Wells See also the certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002, which is also attached to this
report. 59
Interest Maturity Balance
Property Rate Date on 12/31/02
- ------------------------------------------- ----------------- ------------ -----------------
The Willows of Plainview Phase II 7.20% 01/05/13 (1) $ 2,494,654
The Willows of Plainview Phase II 7.20% 01/05/13 (1) $ 1,489,917
Lakeshore Business Center Phase I 8.125% 08/01/08 (2) $ 3,315,490
Lakeshore Business Center Phase II 8.125% 08/01/08 (2) $ 3,567,113
Lakeshore Business Center Phase III LIBOR + 2.30% 09/08/03 (3) $ 1,844,049
Commonwealth Business Center Phase II LIBOR + 2.75% 08/01/03 (4) $ 800,000
(1) Current monthly principal payments are based upon a 15-year amortization schedule. At maturity, we believe the
mortgages will have been repaid based on the current rate of amortization.
(2) Current monthly principal payments are based upon a 12-year amortization schedule. At maturity, we believe the
mortgages will have been repaid based on the current rate of amortization.
(3) The construction loan for Lakeshore Business Center Phase III required interest payments only through September
2001. Principal payments were required starting October 2001. We anticipate replacing the construction loan with
permanent financing at or before its maturity.
(4) The short term mortgage for Commonwealth Business Center Phase II requires interest payments only through
August 2003. We anticipate replacing the short term mortgage with additional financing at or before its maturity.
Year of Square Feet and % of Current Annual Rental
Major Tenant (1) : Expiration Net Rentable Area per Square Foot
- ------------------------------- ------------------ -------------------------- --------------------------
1 2011 13,846 (21.1%) $ 7.50
2 2004 11,674 (17.8%) $ 7.15
(1) Major tenants are those that individually occupy 10% or more of the rentable square footage.
The Willows of Plainview Phase II
Year of Square Feet and % of Current Annual Rental
Major Tenant (1) : Expiration Net Rentable Area per Square Foot
- ------------------------------- ------------------ -------------------------- --------------------------
1 2008 27,868 (28.8%) $9.75
(1) Major tenants are those that individually occupy 10% or more of the rentable square footage.
Lakeshore Business Center Phase III
Year of Square Feet and % of Current Annual Rental
Major Tenant (1) : Expiration Net Rentable Area per Square Foot
- ------------------------------- ------------------ -------------------------- --------------------------
1 2006 4,689 (12.0%) $14.15
2 2006 6,190 (15.8%) $14.04
(1) Major tenants are those that individually occupy 10% or more of the rentable square footage.
Additional Operating Data
Federal Property Annual
Tax Basis Tax Rate Property Taxes
------------------ ----------------- ------------------
Wholly-Owned Properties
Commonwealth Business Center Phase II $ 4,822,032 .010850 $ 34,177
Joint Venture Properties
The Willows of Plainview II 8,145,197 .010950 65,768
Lakeshore Business Center Phase I 10,549,904 .025064 168,225
Lakeshore Business Center Phase II 12,585,246 .025064 187,967
Lakeshore Business Center Phase III 4,729,434 .025064 59,787
Property Contributing Owner
- ----------------------------------------------- ------------------------------------------------
Lakeshore Business Center Phase I NTS-Properties IV and NTS-Properties V
Lakeshore Business Center Phase II NTS-Properties Plus Ltd.
Undeveloped land adjacent to the Lakeshore NTS-Properties Plus Ltd.
Business Center development (3.8 acres)
Undeveloped land adjacent to the Lakeshore NTS/Fort Lauderdale, Ltd.
Business Center development (2.4 acres)
University Business Center Phase II NTS-Properties V and NTS Properties Plus Ltd.
Loan Balance
on 12/31/02 Encumbered Property
- ------------------------- --------------------------------------------
$ 3,315,490 Lakeshore Business Center Phase I
$ 3,567,113 Lakeshore Business Center Phase II
$ 1,844,049 Lakeshore Business Center Phase III
2002 2001 2000 1999 1998
--------------- ---------------- --------------- --------------- ----------------
Rental and other income $ 5,034,149 $ 5,139,832 $ 4,915,420 $ 4,871,091 $ 7,067,738
Gain on sale of property
and assets 559 101 -- 71,439 5,364,026
Total expenses 5,793,154 5,602,486 4,963,750 5,033,030 6,924,566
--------------- ---------------- --------------- --------------- ----------------
Income (loss) before
minority interest and
extraordinary item $ (758,446)$ (462,553)$ (48,330)$ (90,500)$ 5,507,198
Minority interest (74,459) (52,034) (10,123) (11,230) 203,291
--------------- ---------------- --------------- --------------- ----------------
Income (loss) after
minority interest before
extraordinary item (683,987) (410,519) (38,207) (79,270) 5,303,907
Extraordinary item -- -- -- -- (1,307,864)
--------------- ---------------- --------------- --------------- ----------------
Net income (loss) $ (683,987)$ (410,519)$ (38,207)$ (79,270)$ 3,996,043
=============== ================ =============== =============== ================
Net income (loss)
allocated to:
General Partner $ (6,840)$ (4,105)$ (382)$ (793)$ 39,961
Limited partners $ (677,147)$ (406,414)$ (37,825)$ (78,477)$ 3,956,082
Net income (loss) per
limited partnership
interest $ (22.19)$ (13.32)$ (1.24)$ (2.39 $ 114.89
Weighted average number
of limited partnership
interests 30,521 30,521 30,620 32,861 34,433
Cumulative net income
(loss) allocated to:
General Partner $ 55,229 $ 62,069 $ 66,174 $ 66,556 $ 67,349
Limited partners $ (5,798,298)$ (5,121,151)$ (4,714,737)$ (4,676,912)$ (4,598,435)
Cumulative taxable
income (loss) allocated to:
General Partner $ 156,787 $ 158,336 $ 165,329 $ 146,496 $ 189,030
Limited partners $ (7,701,424)$ (6,706,294)$ (5,864,636)$ (5,723,508)$ (3,720,315)
Distributions declared:
General Partner $ -- $ -- $ -- $ 12,649 $ --
Limited partners $ -- $ -- $ -- $ 1,252,275 $ --
Cumulative distributions
declared:
General Partner $ 168,176 $ 168,176 $ 168,176 $ 168,176 $ 155,527
Limited partners $ 16,641,479 $ 16,641,479 $ 16,641,479 $ 16,641,479 $ 15,389,204
At year end:
Land, buildings and
amenities, net $ 20,764,422 $ 21,435,471 $ 22,074,949 $ 19,908,042 $ 21,132,411
Total assets $ 22,185,284 $ 23,268,453 $ 24,186,003 $ 23,880,328 $ 26,670,378
Mortgages and notes
payable $ 13,517,370 $ 13,792,816 $ 14,436,464 $ 14,143,157 $ 15,073,762
2002 2001 2000
------------- ------------- --------------
Wholly-Owned Properties
Commonwealth Business Center Phase II (1)(2) 73% 81% 73%
Joint Venture Properties
(Ownership % on December 31, 2002)
The Willows of Plainview Phase II (90.30%)(1) 89% 74% 89%
Lakeshore Business Center Phase I (81.19%)(2) 71% 89% 85%
Lakeshore Business Center Phase II (81.19%)(1)(2) 81% 82% 86%
Lakeshore Business Center Phase III (81.19%)(3) 37% 28% 12%
(1) Current occupancy levels are considered adequate to continue operation of our properties, with the exception of
Lakeshore Business Center Phases I and III.
(2) In our opinion, the decrease in year ending occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
(3) We expect occupancy levels to stabilize near those of Phase II over the next year, as Phase III completes its lease
up phase of operations.
2002 2001 2000
------------- ------------- --------------
Wholly-Owned Properties
Commonwealth Business Center Phase II 77% 75% 83%
Joint Venture Properties
(Ownership % on December 31, 2002)
The Willows of Plainview Phase II (90.30%) 85% 83% 92%
Lakeshore Business Center Phase I (81.19%)(1) 80% 85% 78%
Lakeshore Business Center Phase II (81.19%) 84% 82% 86%
Lakeshore Business Center Phase III (81.19%)(2) 36% 26% 12%
(1) In our opinion, the decrease in average occupancy is only a temporary fluctuation and does not represent a
permanent downward occupancy trend.
(2) We expect occupancy levels to stabilize near those of Phases I and II over the next year, as Phase III completes its
lease up phase of operations.
2002 2001 2000
------------- ------------- --------------
Wholly-Owned Properties
Commonwealth Business Center Phase II $ 544,644 $ 580,976 $ 636,495
Joint Venture Properties
(Ownership % on December 31, 2002)
The Willows of Plainview Phase II (90.30%) $ 1,227,435 $ 1,243,571 $ 1,318,620
Lakeshore Business Center Phase I (81.19%) $ 1,568,755 $ 1,608,506 $ 1,404,217
Lakeshore Business Center Phase II (81.19%) $ 1,399,961 $ 1,460,407 $ 1,414,306
Lakeshore Business Center Phase III (81.19%) $ 290,620 $ 214,053 $ 5,123
Ownership of Joint Ventures
2002
-----------------------------------------------------------------------
Residential Commercial Partnership Total
-----------------------------------------------------------------------
Net revenues $ 1,227,435 $ 3,803,980 $ 3,293 $ 5,034,708
Operating expense 593,838 1,551,296 (2,000) 2,143,134
Interest expense 298,498 720,638 20,362 1,039,498
Depreciation and amortization 226,011 1,094,496 18,619 1,339,126
Net loss (75,047) (248,447) (360,493) (683,987)
2001
-----------------------------------------------------------------------
Residential Commercial Partnership Total
-----------------------------------------------------------------------
Net revenues $ 1,243,571 $ 3,863,942 $ 32,420 $ 5,139,933
Operating expense 587,947 1,525,985 2,000 2,115,932
Interest expense 317,072 798,266 20,362 1,135,700
Depreciation and amortization 221,236 1,014,017 18,619 1,253,872
Net loss (12,115) (136,911) (261,493) (410,519)
2000
-----------------------------------------------------------------------
Residential Commercial Partnership Total
-----------------------------------------------------------------------
Net revenues $ 1,318,620 $ 3,460,141 $ 136,659 $ 4,915,420
Operating expense 515,038 1,204,749 -- 1,719,787
Interest expense 332,422 653,248 20,362 1,006,032
Depreciation and amortization 215,555 810,149 18,839 1,044,543
Net income (loss) 78,063 68,694 (184,964) (38,207)
2002 2001 2000
-------------- ------------- -------------
Operating activities $ 335,459 $ 751,273 $ 1,105,897
Investing activities (502,135) (520,684) (3,379,935)
Financing activities (279,971) (644,998) 175,167
-------------- ------------- -------------
Net decrease in cash and equivalents $ (446,647)$ (414,409)$ (2,098,871)
============== ============= =============
Payments Due by Period
--------------------------------------------------------------------------
Within One Two - Three Four - Five After 5
Contractual Obligations Total Year Years Years Years
- -------------------------------- ------------- ------------- ------------- ------------- -------------
Long-term debt $ 13,517,370 $ 3,926,320 $ 2,875,481 $ 3,367,678 $ 3,347,891
Capital lease obligations $ -- $ -- $ -- $ -- $ --
Operating leases (1) $ -- $ -- $ -- $ -- $ --
Other long-term obligations (2) $ -- $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- -------------
Total contractual cash
obligations $ 13,517,370 $ 3,926,320 $ 2,875,481 $ 3,367,678 $ 3,347,891
============= ============= ============= ============= =============
(1) We are party to numerous small operating leases for office equipment such as copiers, postage machines and fax
machines, which represent an insignificant obligation.
(2) We are party to several annual maintenance agreements with vendors for such items as outdoor maintenance, pool
service and security systems, which represent an insignificant obligation.
Amount of Commitment Expiration Per Period
-----------------------------------------------------------
Total
Other Commercial Amounts Within One Two - Three Four - Five Over 5
Commitments Committed Year Years Years Years
- ------------------------------- -------------- ------------- ------------- ------------- -------------
Line of credit $ -- $ -- $ -- $ -- $ --
Standby letters of credit and
guarantees $ -- $ -- $ -- $ -- $ --
Other commercial
commitments (1) $ -- $ -- $ -- $ -- $ --
-------------- ------------- ------------- ------------- -------------
Total commercial
commitments $ -- $ -- $ -- $ -- $ --
============== ============= ============= ============= =============
(1) We do not, as a practice, enter into long term purchase commitments for commodities or services. We may from
time to time agree to "fee for service arrangements" which are for a term of greater than one year.
Ernst & Young LLP
March 26, 2003
Report. This report has not been reissued by Andersen.
March 21, 2002
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
----------------- -----------------
ASSETS
Cash and equivalents $ 235,801 $ 682,448
Cash and equivalents - restricted 74,602 120,424
Accounts receivable 332,279 237,700
Land, buildings and amenities, net 20,764,422 21,435,471
Other assets 778,180 792,410
----------------- -----------------
TOTAL ASSETS $ 22,185,284 $ 23,268,453
================= =================
LIABILITIES AND PARTNERS' EQUITY
Mortgages and notes payable $ 13,517,370 $ 13,792,816
Accounts payable 268,940 586,621
Security deposits 164,707 214,132
Other liabilities 205,071 117,440
----------------- -----------------
TOTAL LIABILITIES 14,156,088 14,711,009
MINORITY INTEREST 1,035,110 879,371
COMMITMENTS AND CONTINGENCIES (Note 8)
PARTNERS' EQUITY 6,994,086 7,678,073
----------------- -----------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 22,185,284 $ 23,268,453
================= =================
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
------------- ------------- -------------
REVENUES
Rental income $ 5,006,595 $ 5,077,144 $ 4,756,468
Gain on sale of assets 559 101 --
Interest and other income 27,554 62,688 158,952
------------- ------------- -------------
TOTAL REVENUES 5,034,708 5,139,933 4,915,420
EXPENSES
Operating expenses 1,467,950 1,485,550 1,138,598
Operating expenses - affiliated 675,184 630,382 581,189
Loss on disposal of assets 70,531 2,978 195,722
Interest expense 1,039,498 1,135,700 1,006,032
Management fees 283,677 285,864 271,852
Real estate taxes 515,924 503,174 433,269
Professional and administrative expenses 233,440 119,679 143,324
Professional and administrative expenses -
affiliated 167,824 185,287 149,221
Depreciation and amortization 1,339,126 1,253,872 1,044,543
------------- ------------- -------------
TOTAL EXPENSES 5,793,154 5,602,486 4,963,750
Loss before minority interest $ (758,446)$ (462,553)$ (48,330)
Minority interest (74,459) (52,034) (10,123)
------------- ------------- -------------
Net loss $ (683,987)$ (410,519)$ (38,207)
============= ============= =============
Net loss allocated to the limited partners $ (677,147)$ (406,414)$ (37,825)
============= ============= =============
Net loss per limited partnership interest $ (22.19)$ (13.32)$ (1.24)
============= ============= =============
Weighted average number of limited
partnership interests 30,521 30,521 30,620
============= ============= =============
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (1)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Limited
Partners' Limited General
Interests Partners Partner Total
------------- ------------- -------------- -------------
PARTNERS' EQUITY/(DEFICIT)
Balances on January 1, 2000 30,621 $ 8,251,319 $ (101,520)$ 8,149,799
Net loss (37,825) (382) (38,207)
Repurchase of limited partnership
interests (100) (23,000) -- (23,000)
------------- ------------- -------------- -------------
Balances on December 31, 2000 30,521 8,190,494 (101,902) 8,088,592
Net loss (406,414) (4,105) (410,519)
------------- ------------- -------------- -------------
Balances on December 31, 2001 30,521 7,784,080 (106,007) 7,678,073
Net loss (677,147) (6,840) (683,987)
------------- ------------- -------------- -------------
Balances on December 31, 2002 30,521 $ 7,106,933 $ (112,847)$ 6,994,086
============= ============= ============== =============
(1) For the periods presented, there are no elements of other comprehensive income as defined by the Financial
Accounting Standards Board, Statement of Financial Accounting Standards Statement No. 130, "Reporting
Comprehensive Income."
A MARYLAND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (683,987)$ (410,519)$ (38,207)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of assets (559) (101) --
Loss on disposal of assets 70,531 2,978 195,722
Depreciation and amortization 1,575,006 1,478,316 1,207,135
Changes in assets and liabilities:
Cash and equivalents - restricted 45,822 (72,035) 80,601
Accounts receivable (94,579) (70,271) (52,923)
Other assets (222,841) (235,693) (353,547)
Accounts payable (317,681) 219,463 13,861
Security deposits (49,425) (12,959) 33,128
Other liabilities 87,631 (95,872) 30,250
Minority interest loss (74,459) (52,034) (10,123)
------------- ------------- --------------
Net cash provided by operating activities 335,459 751,273 1,105,897
------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of land and buildings 559 233 --
Additions to land, buildings and amenities (732,892) (598,936) (3,386,394)
Minority interest 230,198 78,019 6,459
------------- ------------- --------------
Net cash used in investing activities (502,135) (520,684) (3,379,935)
------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in mortgages and notes payable 955,974 466,551 1,300,327
Principal payments on mortgages and notes payable (1,231,420) (1,110,199) (1,007,020)
Increase in loan costs (4,525) (1,350) (95,140)
Repurchase of limited partnership interests -- -- (23,000)
------------- ------------- --------------
Net cash (used in) provided by financing activities (279,971) (644,998) 175,167
------------- ------------- --------------
Net decrease in cash and equivalents (446,647) (414,409) (2,098,871)
CASH AND EQUIVALENTS, beginning of year 682,448 1,096,857 3,195,728
------------- ------------- --------------
CASH AND EQUIVALENTS, end of year $ 235,801 $ 682,448 $ 1,096,857
============= ============= ==============
Interest paid on a cash basis $ 987,759 $ 1,090,475 $ 1,069,527
============= ============= ==============
A MARYLAND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
104,000 net rentable square feet located in Fort Lauderdale, Florida.
Lakeshore Business Center Phase II - a business center with approximately
97,000 net rentable square feet located in Fort Lauderdale, Florida.
Lakeshore Business Center Phase III - a business center with approximately
39,000 net rentable square feet located in Fort Lauderdale, Florida.
2002 2001 2000
------------- ------------- --------------
Net loss $ (683,987)$ (410,519)$ (38,207)
Items handled differently for tax purposes:
Depreciation and amortization 2,716 41,063 18,893
Rental income (27,140) (31,684) 11,084
Other (288,268) (447,512) (114,065)
------------- ------------- --------------
Taxable loss $ (996,679)$ (848,652)$ (122,295)
============= ============= ==============
F) Use of Estimates in the Preparation of Financial Statements
2002 2001
--------------- ----------------
Land and improvements $ 10,648,510 $ 10,643,419
Buildings, improvements and amenities 30,438,924 30,222,749
--------------- ----------------
41,087,434 40,866,168
Less accumulated depreciation 20,323,012 19,430,697
--------------- ----------------
$ 20,764,422 $ 21,435,471
=============== ================
2002 2001
--------------- ----------------
Mortgage payable to an insurance company in monthly
installments, bearing interest at fixed rate of 8.125%, due
August 1, 2008, secured by land and a building. $ 3,567,113 $ 4,043,630
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 8.125%, due
August 1, 2008, secured by land and buildings. 3,315,490 3,758,395
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.2%, due
January 5, 2013, secured by land, buildings and amenities. 2,494,654 2,657,319
Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.2%, due
January 5, 2013, secured by land, buildings and amenities. 1,489,917 1,587,068
Mortgage payable to a bank in monthly installments, bearing
interest at a variable rate based on LIBOR daily rate plus 2.3%,
currently 4.17%, due on September 8, 2003, secured by land
and a building. 1,844,049 1,720,475
Mortgage payable to a bank in monthly installments, bearing
interest at a variable rate based on LIBOR one-month rate plus
2.75%, currently 4.13%, due on August 1, 2003, secured by
land and a building. 800,000 --
Note payable to a bank in monthly installments, bearing interest
at the Prime Rate, but not less than 6%, due April 5, 2003. On
December 31, 2002, the interest rate was 6%. 5,595 23,599
Note payable to a bank in monthly installments, bearing interest
at the Prime Rate, but not less than 6%, due April 5, 2003. On
December 31, 2002, the interest rate was 6%. 552 2,330
--------------- ----------------
$ 13,517,370 $ 13,792,816
=============== ================
For the Years Ended December 31, Amount
- ------------------------------------ ---------------------------
2003 $ 3,926,320
2004 1,380,989
2005 1,494,492
2006 1,617,349
2007 1,750,329
Thereafter 3,347,891
---------------------------
$ 13,517,370
===========================
For the Years Ended December 31, Amount
- ------------------------------------ ---------------------------
2003 $ 2,321,306
2004 2,005,264
2005 1,293,327
2006 823,737
2007 644,827
Thereafter 811,609
---------------------------
$ 7,900,070
===========================
Note 7 - Related Party Transactions
For the Years Ended December 31,
---------------------------------------------------------
2002 2001 2000
------------------ ------------------ -----------------
Property management fees $ 283,677 $ 285,864 $ 271,852
------------------ ------------------ -----------------
Property management 441,170 372,746 334,296
Leasing 135,610 164,865 164,736
Administrative - operating 97,022 89,423 78,121
Other 1,382 3,348 4,036
------------------ ------------------ -----------------
Total operating expenses - affiliated 675,184 630,382 581,189
------------------ ------------------ -----------------
Professional and administrative expenses - affiliated 167,824 185,287 149,221
------------------ ------------------ -----------------
Repairs and maintenance fees 32,505 31,858 178,879
Leasing commissions 77,760 94,706 97,910
Construction management 6,061 2,350 38
------------------ ------------------ -----------------
Total related party transactions capitalized 116,326 128,914 276,827
------------------ ------------------ -----------------
Total related party transactions $ 1,243,011 $ 1,230,447 $ 1,279,089
================== ================== =================
Note 8 - Commitments and Contingencies
2002
---------------------------------------------------------
Residential Commercial Total
----------------- ------------------ ------------------
Rental income $ 1,225,210 $ 3,781,385 $ 5,006,595
Interest and other income 1,666 22,595 24,261
Gain on sale of assets 559 -- 559
----------------- ------------------ ------------------
Total revenues $ 1,227,435 $ 3,803,980 $ 5,031,415
================= ================== ==================
Operating expenses and operating expenses
- affiliated $ 593,838 $ 1,551,296 $ 2,145,134
Loss on disposal of assets 55,372 15,159 70,531
Interest expense 298,498 720,638 1,019,136
Management fees 62,995 220,682 283,677
Real estate taxes 65,768 450,156 515,924
Depreciation and amortization 226,011 1,094,496 1,320,507
----------------- ------------------ ------------------
Total expenses $ 1,302,482 $ 4,052,427 $ 5,354,909
----------------- ------------------ ------------------
Net loss $ (75,047)$ (248,447)$ (323,494)
================= ================== ==================
Land, buildings and amenities, net $ 3,656,265 $ 17,100,980 $ 20,757,245
================= ================== ==================
Expenditures for land, buildings and
amenities $ 164,738 $ 568,154 $ 732,892
================= ================== ==================
Segment liabilities $ 4,099,888 $ 10,032,994 $ 14,132,882
================= ================== ==================
2001
---------------------------------------------------------
Residential Commercial Total
----------------- ------------------ ------------------
Rental income $ 1,239,900 $ 3,837,244 $ 5,077,144
Interest and other income 3,570 26,698 30,268
Gain on sale of assets 101 -- 101
----------------- ------------------ ------------------
Total revenues $ 1,243,571 $ 3,863,942 $ 5,107,513
================= ================== ==================
Operating expenses and operating expenses
- affiliated $ 587,947 $ 1,525,985 $ 2,113,932
Loss on disposal of assets 2,528 450 2,978
Interest expense 317,072 798,266 1,115,338
Management fees 62,877 222,987 285,864
Real estate taxes 64,026 439,148 503,174
Depreciation and amortization 221,236 1,014,017 1,235,253
----------------- ------------------ ------------------
Total expenses $ 1,255,686 $ 4,000,853 $ 5,256,539
----------------- ------------------ ------------------
Net loss $ (12,115)$ (136,911)$ (149,026)
================= ================== ==================
Land, buildings and amenities, net $ 3,777,892 $ 17,645,618 $ 21,423,510
================= ================== ==================
Expenditures for land, buildings and
amenities $ 90,223 $ 508,713 $ 598,936
================= ================== ==================
Segment liabilities $ 4,326,161 $ 10,308,231 $ 14,634,392
================= ================== ==================
2000
---------------------------------------------------------
Residential Commercial Total
----------------- ------------------ ------------------
Rental income $ 1,313,898 $ 3,442,570 $ 4,756,468
Interest and other income 4,722 17,571 22,293
----------------- ------------------ ------------------
Total revenues $ 1,318,620 $ 3,460,141 $ 4,778,761
================= ================== ==================
Operating expenses and operating expenses
- affiliated $ 515,038 $ 1,204,749 $ 1,719,787
Loss on disposal of assets 46,351 149,371 195,722
Interest expense 332,422 653,248 985,670
Management fees 66,859 204,993 271,852
Real estate taxes 64,332 368,937 433,269
Depreciation and amortization 215,555 810,149 1,025,704
----------------- ------------------ ------------------
Total expenses $ 1,240,557 $ 3,391,447 $ 4,632,004
----------------- ------------------ ------------------
Net income $ 78,063 $ 68,694 $ 146,757
================= ================== ==================
Land, buildings and amenities, net $ 3,916,523 $ 18,141,681 $ 22,058,204
================= ================== ==================
Expenditures for land, buildings and
amenities $ 28,041 $ 3,358,353 $ 3,386,394
================= ================== ==================
Segment liabilities $ 4,645,824 $ 10,677,693 $ 15,323,517
================= ================== ==================
2002 2001 2000
----------------- ------------------ ------------------
NET REVENUES
Revenues for reportable segments $ 5,031,415 $ 5,107,513 $ 4,778,761
Other income for Partnership 3,293 32,420 136,659
----------------- ------------------ ------------------
Total net revenues $ 5,034,708 $ 5,139,933 $ 4,915,420
================= ================== ==================
OPERATING EXPENSES
Operating expenses for reportable segments $ 2,145,134 $ 2,113,932 $ 1,719,787
Operating expenses for Partnership (2,000) 2,000 --
----------------- ------------------ ------------------
Total operating expenses $ 2,143,134 $ 2,115,932 $ 1,719,787
================= ================== ==================
INTEREST EXPENSE
Interest expense for reportable segments $ 1,019,136 $ 1,115,338 $ 985,670
Interest expense for Partnership 20,362 20,362 20,362
----------------- ------------------ ------------------
Total interest expense $ 1,039,498 $ 1,135,700 $ 1,006,032
================= ================== ==================
DEPRECIATION AND AMORTIZATION
Depreciation and amortization for
reportable segments $ 1,320,507 $ 1,235,253 $ 1,025,704
Depreciation and amortization for
Partnership 18,619 18,619 18,839
----------------- ------------------ ------------------
Total depreciation and amortization $ 1,339,126 $ 1,253,872 $ 1,044,543
================= ================== ==================
NET INCOME (LOSS)
Net income (loss) for reportable segments $ (323,494)$ (149,026)$ 146,757
Net loss for Partnership (434,952) (313,527) (195,087)
Minority interest (74,459) (52,034) (10,123)
----------------- ------------------ ------------------
Total net loss $ (683,987)$ (410,519)$ (38,207)
================= ================== ==================
LAND, BUILDINGS AND AMENITIES
Land, buildings and amenities for
reportable segments $ 20,757,245 $ 21,423,510 $ 22,058,204
Land, buildings and amenities for
Partnership 7,177 11,961 16,745
----------------- ------------------ ------------------
Total land, buildings and amenities $ 20,764,422 $ 21,435,471 $ 22,074,949
================= ================== ==================
LIABILITIES
Liabilities for reportable segments $ 14,132,882 $ 14,634,392 $ 15,323,517
Liabilities for Partnership 23,206 76,617 (79,492)
----------------- ------------------ ------------------
Total liabilities $ 14,156,088 $ 14,711,009 $ 15,244,025
================= ================== ==================
For the Quarters Ended
--------------------------------------------------------------------
2002 March 31 June 30 September 30 December 31
- ------------------------------------ --------------- ---------------- --------------- ----------------
Total revenues $ 1,281,490 $ 1,253,826 $ 1,279,281 $ 1,220,111
Total expenses 1,412,448 1,423,951 1,501,058 1,455,697
Minority interest (13,688) (15,663) (25,986) (19,122)
Net loss (117,270) (154,462) (195,791) (216,464)
Net loss allocated to the
limited partners (116,097) (152,917) (193,833) (214,300)
Net loss per limited
partnership interest (3.80) (5.01) (6.35) (7.03)
For the Quarters Ended
--------------------------------------------------------------------
2001 March 31 June 30 September 30 December 31
- ------------------------------------ --------------- ---------------- --------------- ----------------
Total revenues $ 1,283,132 $ 1,259,317 $ 1,312,442 $ 1,285,042
Total expenses 1,343,905 1,445,231 1,395,220 1,418,130
Minority interest (12,425) (17,911) (12,228) (9,470)
Net loss (48,348) (168,003) (70,550) (123,618)
Net loss allocated to the
limited partners (47,865) (166,323) (69,845) (122,381)
Net loss per limited
partnership interest (1.57) (5.45) (2.29) (4.01)
Note 11 - Subsequent Events
Oceanridge Investments, Ltd. 2,632 Interests (8.62%)
6110 North Ocean Blvd, #37
Boynton Beach, Florida 33435
ORIG, LLC 11,862 Interests (38.86%)
10172 Linn Station Road
Louisville, Kentucky 40223
J. D. Nichols 59.90%
10172 Linn Station Road
Louisville, Kentucky 40223
NTS Capital Corporation .10%
10172 Linn Station Road
Louisville, Kentucky 40223
For the Years Ended December 31,
---------------------------------------------------------
2002 2001 2000
------------------ ------------------ -----------------
Property management fees $ 283,677 $ 285,864 $ 271,852
------------------ ------------------ -----------------
Property management 441,170 372,746 334,296
Leasing 135,610 164,865 164,736
Administrative - operating 97,022 89,423 78,121
Other 1,382 3,348 4,036
------------------ ------------------ -----------------
Total operating expenses - affiliated 675,184 630,382 581,189
------------------ ------------------ -----------------
Professional and administrative expenses - affiliated 167,824 185,287 149,221
------------------ ------------------ -----------------
Repairs and maintenance fees 32,505 31,858 178,879
Leasing commissions 77,760 94,706 97,910
Construction management 6,061 2,350 38
------------------ ------------------ -----------------
Total related party transactions capitalized 116,326 128,914 276,827
------------------ ------------------ -----------------
Total related party transactions $ 1,243,011 $ 1,230,447 $ 1,279,089
================== ================== =================
Schedules Page No.
III-Real Estate and Accumulated Depreciation 54-56
Exhibit No.
3. Amended and Restated Agreement and Certificate of Limited Partnership *
of NTS-Properties V, a Maryland limited partnership.
3a. First Amendment to Amended and Restated Agreement of Limited **
Partnership of NTS-Properties V, a Maryland limited partnership.
10. Property Management Agreement between NTS Development Company *
and NTS-Properties V, a Maryland limited partnership.
99.1 Certification of Chief Executive Officer Pursuant to Section 906 ***
of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer Pursuant to Section 906 ***
of the Sarbanes-Oxley Act of 2002.
* Incorporated by reference to documents filed with the Securities and Exchange Commission
in connection with the filing of the Registration Statements on Form S-11 on May 1, 1984
(effective August 1, 1984) under Commission File No. 2-90818.
** Incorporated by reference to Form 10-K filed with the Securities and Exchange Commission
for the fiscal year ended December 31, 1987 under Commission File No. 0-13400.
*** Attached as an exhibit with this Form 10-K.
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2002
The Willows Lakeshore
Commonwealth of Plainview Business
Business Center Phase II Center Phase I
----------------- ---------------- ---------------
Encumbrances N/A (A) (A)
Initial cost to Partnership:
Land and improvements $ 946,039 $ 1,775,547 $ 3,011,184
Buildings, improvements and amenities 1,574,747 6,240,105 5,053,025
Cost capitalized subsequent to acquisition:
Improvements (net of retirements) 2,379,924 279,684 2,690,952
Gross amount at which carried
December 31, 2002:
Land and improvements 1,006,653 1,825,341 2,701,395
Buildings, improvements and amenities 3,894,057 6,469,995 8,053,766
----------------- ---------------- ---------------
Total $ 4,900,710 $ 8,295,336 $ 10,755,161
================= ================ ===============
Accumulated depreciation $ 3,303,705 $ 4,639,071 $ 6,199,295
================= ================ ===============
Date of construction 09/85 08/85 05/86
Date acquired N/A N/A N/A
Life at which depreciation in latest income
statement is computed (B) (B) (B)
(A) First mortgage held by an insurance company.
(B) Depreciation is computed using the straight-line method over the estimated useful lives of the assets which are 5-30
years for land improvements, 3-30 years for buildings and improvements, 3-7 years for amenities and the applicable
lease term for tenant improvements.
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2002
Lakeshore Lakeshore
Business Business Total
Center Phase II Center Phase III Pages 54-55
--------------- ----------------- ---------------
Encumbrances (A) (B)
Initial cost to Partnership:
Land $ 6,904,246 $ 2,258,235 $ 14,895,251
Buildings and improvements 14,424,541 2,227,580 29,519,998
Cost capitalized subsequent to
acquisition:
Improvements (net of retirements) (8,743,541) 41,243 (3,351,738)
Gross amount at which carried
December 31, 2002: (C)
Land 3,731,622 1,383,499 10,648,510
Buildings and improvements 8,853,624 3,143,559 30,415,001
--------------- ----------------- ---------------
Total $ 12,585,246 $ 4,527,058 $ 41,063,511
=============== ================= ===============
Accumulated depreciation $ 5,769,627 $ 394,568 $ 20,306,266
=============== ================= ===============
Date of construction N/A 12/00
Date acquired 01/95 N/A
Life at which depreciation in latest
income statement is computed (D) (D)
(A) First mortgage held by an insurance company.
(B) First mortgage held by a bank.
(C) Aggregate cost of real estate for tax purposes is $41,270,767.
(D) Depreciation is computed using the straight-line method over the estimated useful lives of the assets which are 5-30
years for land improvements, 3-30 years for buildings and improvements, 3-7 years for amenities and the applicable
lease term from tenant improvements.
Total gross cost on December 31, 2002 $ 41,063,511
Additions to Partnership for computer hardware and software in 1999 and 2000 23,923
---------------
Balance on December 31, 2002 41,087,434
Less accumulated depreciation - per above (20,306,266)
Less accumulated depreciation for Partnership computer hardware and software (16,746)
---------------
Land, buildings and amenities, net on December 31, 2002 $ 20,764,422
===============
A MARYLAND LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Real Accumulated
Estate Depreciation
------------------ ------------------
Balances on January 1, 2000 $ 37,589,279 $ 17,681,237
Additions during period:
Improvements 3,386,394 --
Depreciation (A) -- 1,023,765
Deductions during period:
Retirements (432,505) (236,783)
------------------ ------------------
Balances on December 31, 2000 40,543,168 18,468,219
Additions during period:
Improvements 598,936 --
Depreciation (A) -- 1,235,304
Deductions during period:
Retirements (275,936) (272,826)
------------------ ------------------
Balances on December 31, 2001 40,866,168 19,430,697
Additions during period:
Improvements 732,892 --
Depreciation (A) -- 1,333,411
Deductions during period:
Retirements (511,626) (441,096)
------------------ ------------------
Balances on December 31, 2002 $ 41,087,434 $ 20,323,012
================== ==================
(A) The additions charged to accumulated depreciation on this schedule will differ from the depreciation and
amortization on the Consolidated Statements of Cash Flows due to the amortization of loan costs and special tenant
allowance.
NTS-PROPERTIES V,
A Maryland Limited Partneship
By: NTS-Properties Associates V,
General Partner
By: NTS Capital Corporation,
General Partner
/s/ Gregory A. Wells
Gregory A. Wells
Chief Financial Officer of
NTS Capital Corporation
Date: March 31, 2003
Signature Title
/s/ J. D. Nichols
J. D. Nichols General Partner of NTS-Properties Associates V and
Chairman of the Board and Sole Director of NTS
Capital Corporation
/s/ Brian F. Lavin
Brian F. Lavin President of NTS Capital Corporation
/s/ Gregory A. Wells
Gregory A. Wells Chief Financial Officer of NTS Capital Corporation
President of NTS Capital Corporation, General Partner of NTS-Properties Associates V, General Partner of NTS-
Properties V, a Maryland Limited
Partnership
Chief Financial Officer of NTS Capital Corporation, General Partner of NTS-Properties Associates V, General Partner
of NTS-Properties V, a Maryland Limited Partnership